Entry Modes

In the contemporary environment, where the entire world is a marketplace, the companies cannot afford to ignore the international expansion. Going global is a challenging endeavor that can generate excellent results, when strategized and executed in an informed professional manner. In the recent years, the term of “born global” has entered the business lexicon and corporate planning. It implies that companies are entering the international arena from the earliest stages and maturing in the global environments, securing the international position. Despite the growing firm internationalization, the selection of entry modes is an important decision for the companies. Every of the six major entry modes have advantages and disadvantages. The selection depends on the firm strategic orientation, resources, capabilities, and long-term projections. In the current best website to buy a research paper, the franchising and exporting are analyzed to explain the strengths and weaknesses of the two and provide recommendations as to when they are most effective.

The Theoretical Background

Franchising is the mode of international expansion that creates the network of semi-independent partners in the foreign country. The owner of the business offers support in terms of business management, provides the idea and the regulations of processes, and participates in some decision making. The franchise owner has the ability to expand the business with the minimal financial investment, while maintaining the degree of participation in the branding and operations. On the other hand, the franchisee exercises the major responsibility for the company, invests larger part of resources, and enjoys the support network of the business owner. The advantages include high market understanding, ability to maximize the impact of business, and low financial risks. The disadvantages stem from control methods, monitoring challenges, and lower impact on the decision making, since franchisees are mostly independent in daily activities. The mode of entry is particularly effective in the service industry, where the ownership of idea is a key strategic value.

Exporting is a high control, yet high risk international expansion model. It implies that the business enters the foreign country with the full control over business and maximum participation in the daily activities. The advantages stem from the direct involvement, as the company holds complete responsibility for the decision making, invests the resources in expansion, and avoids hiring and partnering with the third parties. However, exporting is a risky decision, since the financial risks are extremely high, and the lack of knowledge in the foreign market can create barriers to effective maximization of profits. Despite the risks and challenges, direct exporting is a preferred mode of entry in manufacturing businesses. It offers the capitalization of economies of scale, full control over the quality of product, and standardization of marketing and branding activities. The businesses that aim for scaling on the global market can hire expert and market researchers to inform the decision making and decrease the chances of failure.

Examples of Entry

The examples of franchising on the global scale include most of the fast food chains, when the company utilizes the local manufacturing to the full extend. The leader in the market known in the majority of the world is McDonald’s. The corporate office employs multiple franchisees to scale its business model. The company selects the partners in a foreign country across the supply chain, where all elements of the business are manufactured in the country of operations. The success of franchise that is both product and service stems from the carefully crafted legal agreement, where the franchisee complies with the requirements. On the one hand, the franchisees invest financial resources, pay royalties, and purchase the franchise, placing the high risks in the investment. On the other hand, they receive marketing assistance, access to world-renown brand and collect revenues regularly. The mutually supportive contract allows McDonald’s scale across the globe with the lower financial commitment and higher speed compared to other businesses.

The example of direct exporting is Bulldog, a men skincare brand from the UK. The growth of e-commerce presents the opportunity for many manufacturers to enter the global market as a direct exporter. The online stores provide maximum control over inventory, maximization of economies of scale, and control over entire supply chain for Bulldog. Moreover, the company extended the market coverage by cooperating with the retail stores. The ability to sign contracts with the retailers and observe all the terms is an advantage that a company has with the exporting mode of entry. Although the retail partnership is a slightly different mode of international expansion, it allows optimal control and participation in the manufacturing and presentation of the product. Thus, Bulldog has production facilities in the UK, oversees the entire production process, controls the quality of the goods and has maximum participation in marketing and branding. With the retailer contracts, it is able to scale the online store channel to create the space for customers to interact with the physical product in the stores abroad.

The choice of the mode of entry depends on the multiple factors, including strategic plans, internal capabilities, priorities over control, and the nature of industry a company operates in. In the case of McDonalds, the international brand recognition was possible with franchising and maximization of local production capacities. On the other hand, the case of Bulldog shows that a makeup company prefers to control the production processes that are attached to the brand name and consumer perception. The tangible resources are another factor that defines the preferred mode of international expansion, since the financial capabilities and assets may serve as a facilitator or as a barrier to some modes of international expansion.